Last Year, Toby Made a Capital Contribution of a Pretzel

question 21

Multiple Choice

Last year, Toby made a capital contribution of a pretzel maker having a $2,000 adjusted basis and a $200 FMV to Keke Corporation in exchange for additional stock. This year, Keke Corporation adopted a plan of liquidation. Prior to the adoption of the liquidation plan, Keke had not used the pretzel maker in connection with the conduct of its trade or business. Which of the following statements is true?

• A) Keke Corporation may recognize a loss of $200.
• B) Keke Corporation's basis for determining the loss will be $2,000.
• C) Keke Corporation may recognize a loss of $1,800.
• D) Keke Corporation's basis for determining the loss will be $200.

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Definitions:

Restoration Ecology

The scientific field that uses the principles of ecology to help return a degraded environment as closely as possible to its former undisturbed state.

Ecology

The branch of biology that deals with the relationships between living organisms and their environment.

Degraded Environment

An environment that has experienced a reduction in quality, health, and biodiversity, often due to human activities.

Conservation Biology

A multidisciplinary science that focuses on the study of how humans impact organisms and on the development of ways to protect